Internet advertisement market models relate to advertisers that sponsor link(s) displayed in a World Wide Web space. Internet advertising usually centers upon a user submitting a keyword to a search engine. In addition to information provided by the search engine, links associated with sponsor web pages are displayed to entice the user to click on the sponsored links, directing the user to sponsor web pages. An ad-words auction, or position auction, awards advertisement slots within a World Wide Web display space in decreasing order of attractiveness to viewers.
Advertising cost is commonly referred to as “pay-per-click,” in which an advertiser pays according to the number of times a link sponsored by the advertiser is clicked. Further, conventional search engines have adopted a discriminative charging scheme, ranking displayed link positions according to an expected frequency that a web-link placed at a particular position will be clicked. Generally, web-links allocated at higher ranked positions will generate more clicks and thus more revenue because sponsors are asked to pay more for web-links placed at higher ranked positions.
An advertiser estimates a value that users interested in a particular keyword place on the advertiser's product(s) and/or service(s); however, the advertiser may not want to reveal this unique, or private, value. Further, an advertiser's utility, or payoff, in bidding on a position of a particular web-link can be based on the advertiser's private value, the frequency that the web-link is clicked on by a user, and the price charged to the advertiser (determined by the winning bid amount). Moreover, the bidding strategies of advertisers (or agents) within a position auction can be modeled as a pure Nash equilibrium, in which an agent will choose a strategy that maximizes the agent's own utility with respect to a given set of strategies of other players. However, in a pure Nash equilibrium, each bidder is assumed to be myopic. In other words, assuming each bidder knows the equilibrium strategies of other players, no player will benefit from changing their bid.
One problem with position auction bidding, as conventionally modeled by the pure Nash equilibrium, is that a pure Nash equilibrium may not be reached when participating bidding agents submit their bids dynamically. Another problem with position auction bidding, as conventionally modeled by the pure Nash equilibrium, is that even if a pure Nash equilibrium is achieved, optimal agent utility is not maximized since myopic bidders of a pure Nash equilibrium do not consider the influence their bids have on future decisions of other bidders.
It is therefore desirable to have systems and methods for optimizing bidding agent utility in an ad-words auction.